November 9, 2014 / 11:23 PM / 5 years ago

UPDATE 1-China's Yanzhou rescues Australian arm with $2.3 bln notes sale

* Yancoal refinances to push out debt deadlines

* Yanzhou to inject extra A$1.4 bln to shore up operations

* Noble Group would have to pay $300 mln for its share of notes (Recasts, adds Yancoal, Noble Group comments)

MELBOURNE, Nov 10 (Reuters) - China’s Yanzhou Coal Mining Co Ltd has moved to shore up its struggling Australian arm, Yancoal Australia Ltd, through a $2.3 billion deal to refinance its debt to help it weather a prolonged slump in coal prices.

The move follows the failure of a plan by Yanzhou to privatise Yancoal earlier this year after resistance from the Australian company’s second-largest shareholder, Hong Kong-based trader Noble Group.

Yancoal said on Monday it plans to raise up to $2.3 billion through a sale of convertible notes to shareholders, with its parent Yanzhou kicking in its full 78 percent share, worth $1.8 billion.

Yanzhou will also provide A$1.4 billion to help fund Yancoal’s loss-making coal operations and pay distributions on the notes, cashing up the Australian business that has been hammered by a drop in coal prices to 5-1/2 year lows.

“In a depressed commodities marketplace facing continued uncertainty for the near-term, Yancoal’s existing level of debt is a significant constraint on our future expansion and operational improvement strategies,” Yancoal Chief Executive Reinhold Schmidt said in a statement.

Yancoal’s shares have plunged 71 percent this year, a much bigger fall than its closest rivals in Australia, Whitehaven Coal and New Hope Coal, as it has struggled to manage its debt.

Most of the funds will be used to repay existing senior debt owed to Yanzhou, effectively refinancing short-term debt into long-term debt. The debt is the legacy of Yanzhou’s A$3.5 billion acquisition of Felix Resources in 2009 at the height of the coal boom.

Yanzhou won Australian government approval for the Felix takeover on condition that it cut its stake to less than 70 percent after re-listing Yancoal. However this was dropped last year as selling down a stake would have been too hard in the battered coal sector, where the government feared more job cuts.

Deutsche Bank is handling the renounceable rights offer, which allows shareholders who do not take up their rights to the subordinated capital notes to sell them on the market.

The annual distribution rate on the notes will be set at 7 percent for the first five years.

A spokesman for Noble Group, which would have to pay $300 million to take up its rights to the Yancoal notes on offer, had no immediate comment.

1 US dollar = 1.1565 Australian dollar Reporting by Sonali Paul; Editing by Richard Pullin

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below